Interim Results

RNS Number : 6241F

Tlou Energy Ltd

22 February 2018

 

Tlou Energy Limited / EPIC: TLOU / Sector: Oil & Gas

22 February 2018

Tlou Energy Limited

("Tlou" or "the Company")

Interim Results

Tlou Energy Limited, the AIM and ASX listed company focused on delivering power in Botswana and southern Africa through the development of coal bed methane ('CBM') projects, is pleased to announce its interim results for the six months ended 31 December 2017.

Managing Directors' report

It has been a very productive time for the Company and it gives me great pleasure to provide you with an update of ongoing operations as well as outlining our forward plans and strategy.

The past year has witnessed a period of considerable growth for the Company.  Tlou is now the most advanced gas-to-power developer in Botswana.  This has come about by a disciplined approach designed to incrementally reduce risk.  Things have not always gone our way, however the achievements that we have made of late are very significant indeed.

Recent achievements for the Company include:

Ø A 25-year CBM Mining Licence secured - the only one in Botswana;

Ø Independently certified gas Reserves - the only CBM gas Reserves in Botswana;

Ø Approved Environmental Impact Statement (EIS) in place for field development - the only one in Botswana;

Ø Gas being produced from the Selemo pilot for over 18 months;

Ø CBM gas has been used to power a field generator - proof that power can be generated from Tlou's CBM.

These achievements have been the result of some very hard work and I would like to thank all the Tlou team for their efforts and perseverance over the years to get us to this position.  I'd also like to thank our shareholders for their continued support and patience.  My experience in the industry suggests that these types of projects can take some time to come to fruition and I'm confident that we can make this project a great success both for our shareholders and the people of Botswana.

Tlou is committed to advancing the Company and increasing shareholder wealth by adhering to the following strategy:

1.     Increasing Gas Reserves

The Company has a valuable asset base comprising its vast CBM acreage position in Botswana and its associated independently certified gas Reserves and Contingent Resources. 

Tlou's core business comprises the ongoing conversion of its significant Contingent Resources into Reserves. These Reserves can then be developed to help satisfy the high power demand in the southern African region.

The conversion process requires a systematic approach involving:

Ø Seismic surveys to gain increased confidence in target coal distribution within the project areas;

Ø Core-hole drilling and evaluation to confirm coal quality, thickness and gas content, and;

Ø Production pod drilling and testing to confirm commercial gas volumes.

The geological data collected in the last six months of 2017 included a seismic survey and core-hole drilling campaign.  This new data has resulted in a very significant increase in certified gas Reserves, as recently announced.  A 944% increase in 2P reserves and a 63% increase in 3P Reserves was an excellent result.  This has served to reinforce the value of undertaking the field work in the past year.  We believe that the Lesedi and Mamba Projects will continue to develop into a valuable resource for Tlou shareholders as we work towards increasing the certified gas Reserves in both areas.

Along with increased Reserves, the seismic survey and core-holes have provided additional geological data, including the identification of an area of high potential by the Company's independent geological consultants.  This area was identified as an optimum location for new lateral gas production pods to be drilled.

As part of the strategy of expanding gas Reserves and Contingent Resources, additional drilling is planned for 2018.  Future additional core-holes in Tlou's Mamba permit area will particularly assist in expanding Tlou's development optionality. 

2.     Selling gas via electricity into the grid

In order for Tlou to effectively monetise its gas resources through electricity generation, Tlou needs to maximise its certified gas Reserves and connect to the regional electricity grid in Botswana.  The grid connection process is already well advanced and involves various government and environmental approvals being granted, which Tlou is confident of achieving.  Increasing gas Reserves leads to reduced project risk and generally a more favourable cost of capital.

The Company is planning on building the necessary infrastructure to connect to the existing electricity grid and then selling power into the Botswana market under either a power purchase agreement or on an "as required" basis.  We could also sell power to neighbouring countries by 'wheeling' electricity through the existing Southern African Power Pool (SAPP) transmission network.  Entry to the grid is planned at the town of Serowe, a relatively short distance away from the proposed Lesedi gas processing and power generation facility. 

In addition, the Company is assessing the possibility of installing solar power generation at the proposed Lesedi gas processing and power generation facility.  Solar can work very efficiently in combination with baseload power such as gas.  This could also serve to attract wider investor interest to the project.

The coming 12 months will be a busy period. Subject to results in the field, rig availability and funding, the Company's targets include:

Ø Commencement of initial development drilling in mid-2018;

Ø Potential purchase of drilling rigs to provide more operational control;

Ø Additional core-holes and a new seismic survey;

Ø Further gas Reserves upgrades;

Ø Agreeing a power purchase agreement with either the Botswana Government or a third party;

Ø Approvals for commencement of transmission line and central processing facility construction.

Building on the current Reserve position and accessing the market via the Botswana grid are key objectives that will de-risk the project even further and add value.

Financial Review

The loss for the half-year after income tax amounted to $1,676,624 (December 2016: loss $1,153,668). Information on operations and results during the period are set out below.

The loss for the half-year is higher than the comparative period in the previous year.  Part of this increase is attributed to work conducted in relation to the Company's response to a proposal for a CBM power project submitted to the Government of Botswana during the period.  Costs relating to the proposal response include engineering expenses, technical assessments, and a project feasibility report.  Other increased costs this period included performance rights issued to key personnel during the reporting period amounting to $199,624, a non-cash item representing the valuation of the performance rights issued.

Also included this half-year are share issue costs of $176,685, relating to the capital raisings conducted by the Company during the period.  These have been expensed as they relate to the listing of existing shares.  The gross amount of capital raised amounted to approximately $4.4m.  Employee benefits expense (salaries and Directors' fees) are also higher this period as the comparative period included temporary salary cuts that were agreed with some staff and Directors.  The Company has continued its focus on reducing corporate, administrative, and operating costs wherever possible, where this can be done without any adverse effect on performance.

Net spend on exploration activities during the period amounted to approximately $2m.  This relates to the seismic survey and core-hole drilling that occurred during the period. 

The coming year will be a very exciting time for the Company and we look forward to delivering on our plans. 

Thank you to all our shareholders, staff, consultants, advisors, and management for their support during the period. 

The Half-year report is available on the Company's website at www.tlouenergy.com/reports.

The Company had also released an updated project montage which can be views at www.tlouenergy.com/presentations.

**ENDS**

For further information regarding this announcement please contact:

Tlou Energy Limited	[phone]
Tony Gilby, Managing Director
Solomon Rowland, Company Secretary
Grant Thornton (Nominated Adviser)	[phone]
Samantha Harrison, Colin Aaronson, Harrison Clarke
Shore Capital (Joint Broker)	[phone]
Jerry Keen, Mark Percy, Toby Gibbs
FlowComms Limited (Investor Relations)	[phone]
Sasha Sethi

Company Information

Tlou Energy is focused on delivering Gas-to-Power solutions in Botswana and southern Africa to alleviate some of the chronic power shortage in the region.  Tlou is developing projects using coal bed methane ("CBM") natural gas.  Botswana has a significant energy shortage and generally relies on expensive imported power and diesel generation to fulfil its power requirements.  As 100% owner of the most advanced gas project in the country, the Lesedi CBM Project, Tlou Energy provides investors with access to a compelling opportunity using domestic gas to produce power and displace expensive diesel and imported power.

The Company is listed on the Australian Securities Exchange, London's AIM market and the Botswana Stock Exchange and is led by an experienced Board, management and advisory team including individuals with successful track records in the CBM industry.

Since establishment, the Company has significantly de-risked the project in consideration of its goal to become a significant gas-to-power producer.  The Company flared its first gas in 2014, holds a Mining Licence and nine Prospecting Licences, covering an area of ~8,300km² in total. The Lesedi Project already benefits from significant independently certified Contingent Gas Resources of ~3 trillion cubic feet (3C), and independently certified Gas Reserves of ~427 billion cubic feet (3P) and ~41 billion cubic feet (2P).

The Company is planning an initial scalable gas-to-power project.  Following successful implementation of this first scalable project, the Company plans to expand to provide further power across the southern African region.

Consolidated statement of comprehensive income 

for the half-year ended 31 December 2017

				Consolidated
			Note	Dec 2017	Dec 2016
				$	$
Interest income				820	801
Expenses
Employee benefits expense				(426,980)	(227,073)
Depreciation and amortisation expense				(88,289)	(133,147)
Foreign exchange gain/(loss)				90,736	(55,446)
Share issue costs				(176,685)	-
Performance rights expense				(199,624)	(93,097)
Professional fees				(89,936)	(69,871)
Corporate expenses				(16,237)	(6,031)
Occupancy costs				(21,490)	(23,177)
Other expenses			2	(748,939)	(546,627)
LOSS BEFORE INCOME TAX				(1,676,624)	(1,153,668)
Income tax				-	-
LOSS FOR THE PERIOD				(1,676,624)	(1,153,668)
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations				629,253	1,720,346
Tax effect				-	-
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)				629,253	1,720,346
TOTAL COMPREHENSIVE INCOME/(LOSS)				(1,047,371)	566,678
Earnings per share
				Cents	Cents
Basic loss per share				(0.5)	(0.6)
Diluted loss per share				(0.5)	(0.6)

Consolidated statement of financial position 

as at 31 December 2017

				Consolidated
			Note	Dec 2017	June 2017
				$	$
CURRENT ASSETS
Cash and cash equivalents				7,463,200	6,727,424
Trade and other receivables				204,910	100,674
Other current assets				6,958	8,650
TOTAL CURRENT ASSETS				7,675,068	6,836,748
NON-CURRENT ASSETS
Exploration and evaluation assets			3	52,043,898	49,328,038
Other non-current assets				666,982	694,402
Property, plant and equipment				258,181	320,739
TOTAL NON-CURRENT ASSETS				52,969,061	50,343,179
TOTAL ASSETS				60,644,129	57,179,927
CURRENT LIABILITIES
Trade and other payables				336,626	431,032
Provisions				161,501	166,193
TOTAL CURRENT LIABILITIES				498,127	597,225
NON-CURRENT LIABILITIES
Deferred tax liabilities				369,353	369,353
Provisions				98,000	94,000
TOTAL NON-CURRENT LIABILITIES				467,353	463,353
TOTAL LIABILITIES				965,480	1,060,578
NET ASSETS				59,678,649	56,119,349
EQUITY
Contributed equity			5	87,787,231	83,380,184
Reserves				(2,278,555)	(3,107,432)
Accumulated losses				(25,830,027)	(24,153,403)
TOTAL EQUITY				59,678,649	56,119,349

Consolidated statement of changes in equity 

for the half-year ended 31 December 2017

	Contributed Equity	Share Based Payments Reserve	Foreign Currency Translation Reserve	Accumulated Losses	Total
	$	$	$	$	$
Balance at 1 July 2016	73,931,569	97,001	(4,838,114)	(20,988,080)	48,202,376
Loss for the period	-	-	-	(1,153,668)	(1,153,668)
Other comprehensive income	-	-	1,720,346	-	1,720,346
Total comprehensive income	-	-	1,720,346	(1,153,668)	566,678
Transactions with owners in their capacity as owners
Share based payments	-	93,097	-	-	93,097
Shares issued, net of costs	2,864,684	-	-	-	2,864,684
	2,864,684	93,097	-	-	2,957,781
Balance at 31 December 2016	76,796,253	190,098	(3,117,768)	(22,141,748)	51,726,835
Balance at 1 July 2017	83,380,184	520,500	(3,627,932)	(24,153,403)	56,119,349
Loss for the period	-	-	-	(1,676,624)	(1,676,624)
Other comprehensive income	-	-	629,253	-	629,253
Total comprehensive income	-	-	629,253	(1,676,624)	(1,047,371)
Transactions with owners in their capacity as owners
Share based payments	-	199,624	-	-	199,624
Shares issued, net of costs	4,407,047	-	-	-	4,407,047
	4,407,047	199,624	-	-	4,606,671
Balance at 31 December 2017	87,787,231	720,124	(2,998,679)	(25,830,027)	59,678,649

Consolidated statement of cash flows 

for the half-year ended 31 December 2017

				Consolidated
				Dec 2017	Dec 2016
				$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (inclusive of GST and VAT)				(1,796,542)	(1,057,500)
Interest received				820	801
GST and VAT received				117,549	48,331
NET CASH USED IN OPERATING ACTIVITIES				(1,678,173)	(1,008,368)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation assets				(2,106,573)	(1,003,834)
Payment for property, plant and equipment				(20,741)	(4,058)
NET CASH USED IN INVESTING ACTIVITIES				(2,127,314)	(1,007,892)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares				4,419,259	3,254,326
Share issue costs				(28,377)	(78,472)
NET CASH PROVIDED BY FINANCING ACTIVITIES				4,390,882	3,175,854
Net increase/(decrease) in cash held				585,395	1,159,594
Cash at the beginning of the period				6,727,424	1,224,404
Effects of exchange rate changes on cash				150,381	27,334
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD				7,463,200	2,411,332

Notes to the consolidated financial statements 

for the half-year ended 31 December 2017

Note 1.    Significant accounting policies

Introduction

Tlou Energy Limited (Tlou) is a company domiciled and incorporated in Australia. The Financial Report for the half-year ended 31 December 2017 consists of the Financial Statements of Tlou Energy Limited and the entities it controlled during the period ('Consolidated Entity').

Compliance with accounting standards

The half-year financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting.

The half-year financial report does not include all the notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report of the group.

Basis of preparation

The financial statements have been prepared on an accruals basis and are based on historical costs. The financial report is presented in Australian dollars.

The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period except for the impact of the Standards and Interpretations described below. Where required by Accounting Standards comparative figures have been adjusted to conform to changes in presentation for the current financial year.

New or revised accounting standards and interpretations that are first effective in the current reporting period

The group have adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to their operations and effective for the current reporting period. This adoption has not resulted in any changes to the group's accounting policies and has no effect on the amounts reported in the current and prior periods.

Going Concern

The consolidated financial statements have been prepared on a going concern basis which contemplates that the group will continue to meet its commitments and can therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

Because of the nature of the operations, exploration companies, such as Tlou Energy Limited, find it necessary on a regular basis to raise additional cash funds to fund future exploration activity and meet other necessary corporate expenditure. At the date of this financial report, the ability of the group to execute its currently planned exploration and evaluation activities requires the group to raise additional capital within the next 12 months. Accordingly, the group is in the process of investigating various options for the raising of additional funds which may include but is not limited to an issue of shares or the sale of exploration assets where increased value has been created through previous exploration activity.

At the date of this financial report, none of the above fund raising options have been concluded and no guarantee can be given that a successful outcome will eventuate. The directors have concluded that as a result of the current circumstances there exists a material uncertainty that may cast significant doubt regarding the group's and the company's ability to continue as a going concern and therefore the group and company may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after taking into account the current status of the various funding options currently being investigated and making other enquiries regarding other sources of funding, the directors have a reasonable expectation that the group and the company will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the going concern basis in preparing the financial report.

The interim financial report does not include adjustments relating to the recoverability or classification of recorded assets amounts nor to the amounts or classification of liabilities that might be necessary should the group not be able to continue as a going concern.

Fair values

The fair values of Consolidated Entity's financial assets and financial liabilities approximate their carrying values. No financial assets or financial liabilities are readily traded on organised markets in standardised form.

Accounting estimates and judgements

Critical estimates and judgements are continually evaluated and are consistent with those disclosed in the previous annual report. 

Exploration & evaluation assets

During the reporting period the Consolidated Entity converted a prospecting licence into a mining licence.  A mining licence allows the commencement of commercial development.  Despite this management believe that it is not practical to commence amortisation of the exploration and evaluation assets held in relation to the mining licence as the Consolidated Entity has not yet entered into production of a commercially viable resource. 

Note 2.    Expenses

Loss before income tax includes the following specific expenses:								Dec 2017	Dec 2016
								$	$
Other expenses
●	Stock exchange and secretarial fees							141,453	19,833
●	Investor relations							79,283	45,045
●	Travel and accommodation							110,857	119,259

Note 3.    Exploration and evaluation expenditure

								Dec 2017	June 2017
								$	$
Exploration and evaluation assets								52,043,898	49,328,038
								52,043,898	49,328,038
								Dec 2017	Dec 2016
								$	$
Movements in exploration and evaluation phase
Balance at the beginning of period								49,328,038	46,183,722
Exploration and evaluation expenditure during the half-year								2,081,971	1,848,143
Foreign currency translation								633,889	1,296,173
Balance at the end of period								52,043,898	49,328,038

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

Note 4.    Contingent liabilities

The Directors are not aware of any contingent liabilities at 31 December 2017.

Note 5.    Contributed equity

						Dec 2017	June 2017	Dec 2017	June 2017
						Shares	Shares	$	$
Opening balance						304,042,848	205,619,292	83,380,184	73,931,569
Issue of ordinary shares during the year						25,428,845	98,423,556	4,419,259	9,684,461
Share issue costs						-	-	(12,212)	(235,846)
Ordinary shares ‑ fully paid						329,471,693	304,042,848	87,787,231	83,380,184

Options

Grant Date	Expiry date	Exercise price	Opening Balance July 2017	Exercised During the Year	Granted During the Year	Expired During the year	Closing Balance Dec 2017	Vested & Exercisable
30/11/15	29/11/17	$0.14	1,500,000	1,500,000	-	-	-	-
14/01/16	14/01/18	$0.14	500,000	500,000	-	-	-	-
Total			2,000,000	2,000,000	-	-	-	-

Performance shares

Details of performance shares issued, exercised, and expired during the financial year are set out below:

Vesting Date			Exercise Price		01/07/2017	Issued	Exercised	Expired	31/12/2017
31 January 2017			$0.21		2,275,000	-	2,275,000	-	-
31 January 2017			$0.28		2,275,000	-	-	-	2,275,000
					4,550,000	-	2,275,000	-	2,275,000

The outstanding performance shares have the following key terms and conditions:

Number	Performance condition
2,275,000	The shares will only vest once the share price of the Company's securities listed on the ASX reaches $0.28 and closes at that price or above for a period of 10 consecutive trading days.
	The Performance Shares will lapse if: ·      None of the pricing conditions are met; or ·      the participant does not meet the service conditions.

Note 6.    Commitments

Exploration expenditure

In order to maintain an interest in the exploration tenements (Prospecting Licences) in which the group is involved, the group is committed to meet the conditions under the agreements. The timing and amount of exploration expenditure and obligations of the group are subject to the Prospecting Licence conditions and may vary significantly from the forecast based on the results of the work performed, which will determine the prospectivity of the relevant licence area. Subject to agreement with the appropriate government department, continued development of the area and renewal of the Prospecting Licences, expenditure and work program obligations may be carried forward and incurred in subsequent renewal periods. The obligations are not provided for in the financial statements.

Minimum expenditure requirements

								Dec 2017	June 2017
								$	$
●	not later than 12 months							3,744,078	1,637,420
●	between 12 months and 5 years							813,999	2,637,363
								4,558,077	4,274,783

Note 7.    Segment information

Identification of reportable segments

Operating segments are identified on the basis of internal reports that are regularly reviewed by the executive team in order to allocate resources to the segment and assess its performance. The Company currently operates in one segment, being the exploration, evaluation and development of coalbed methane resources in southern Africa.

Segment revenue

As at 31 December 2017 no revenue has been derived from its operations (2016: $nil).

Segment assets

Segment non-current assets are allocated to countries based on where the assets are located as outlined below.

								Dec 2017	June 2017
								$	$
Botswana								52,965,748	50,341,366
Australia								3,313	1,813
								52,969,061	50,343,179

Note 8.    Events occurring after balance date

Other than the matters discussed in this report, there has not arisen in the interval between the end of the half-year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods.

 

END

 

 

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